Walgreens Looks To Close Stores, Exit Markets In Bid To Save $1B
As Walgreens Boots Alliance prepares for a new CEO, the pharmacy chain plans to shutter 60 clinics and exit five markets entirely in an effort to shore up costs.
Walgreens officials plan to alter store hours based on local market conditions and are focusing on closing unprofitable drugstores, interim CEO Ginger Graham said during a Thursday morning earnings call.
The closures are part of a larger $1B cost-cutting program being launched by Graham in the days before incoming CEO Tim Wentworth takes the helm of the nearly 9,000-unit pharmacy and clinic operator. The leadership change is set to occur on Oct. 23. Graham said Walgreens plans to reduce capital expenditures by $600M as well, Bloomberg reported.
“We're taking a hard look at all projects and stopping those that are not essential,” Graham said on the call. “These actions reduce expenses, but more importantly, they help focus our energy on the most important needs for the business and for our customers.”
Executives didn't identify specific stores that would close or markets where it would exit during the call.
“These exits may take a variety of forms, including outright sales and hybrid equity arrangements, as examples,” Walgreens President John Driscoll said on the call. “As we exit these nonstrategic markets, our long-term focus will be on achieving density and those regions with the greatest potential to drive future profitability growth and where we can best serve patients with our consolidated set of assets.”
Under former CEO Rosalind Brewer, Walgreens spent more than $5B to buy primary care clinic operator VillageMD, which allowed the chain to open primary care offices in hundreds of its drugstores, Bloomberg reported. Brewer stepped down as CEO last month after two years on the job. During her tenure, Brewer shifted Walgreens' focus from a retail and pharmacy provider to offering more primary care, a move that produced mixed results for the company, The New York Times reported, adding that Brewer’s decision to vacate the post was mutually agreed upon by the board of directors.
Graham recently paused the rollout of five fully automated small fulfillment centers that were designed to free up Walgreens’ pharmacists from routine tasks, according to Bloomberg. Walgreens opened 11 small fulfillment centers in the past two years, servicing more than 4,000 stores, Bloomberg reported.
The retail healthcare industry is also experiencing labor tensions, with Walgreens no exception. Pharmacy staff at various Walgreens locations in the U.S. called out of work earlier this week in a protest of alleged harsh working conditions, a move that forced Walgreens to temporarily close a small number of stores due to a lack of workers, CNN reported.
